AbstractThe airline industry is known to be the fastest mode of transportation throughout the United States. Consumers are constantly trying to find cheaper fares, while airliners are constantly analyzing consumer’s trends to decide how to charge fares. Airliners ultimate goal is to increase revenue. Sometimes the increase can lead to bad service and unfriendly competitive practices. The present day airline industry is dominated by larger air carriers. This paper will discuss why the airline industry has developed into an oligopoly, how price wars historically affected main carriers, why many startup carriers failed, and the advantages of price setting, variation in seat pricing and the advantages of collision of larger airlines. History

The first successful flight occurred in 1903 with the Wright brothers in Kitty Hawk, North Carolina. This marked the beginning of the aviation industry. At first airplane travel was not popular. After the U.S. involvement in World War 1, the airline industry’s growth stagnated until 1927. When Charles Lindberg successfully completed a solo flight across the Atlantic Ocean the industry began to evolve. A variety of air transport holding companies began to form, including American Airways, now know as American Airlines. In 1928, the Boeing Company and the United Aircraft and Transportation Corporation were developed. The United Aircraft and Transportation Corporation merged to form the United Airlines. A major growth of the industry occurred with the development of the mail transport system by the United States Postal System. The Kelly Airmail Act of 1925, allowed private airlines to have the opportunity to function as mail carriers through competitive bids. This expanded the opportunities of carrying other forms of cargo, including passengers. In 1926, because of the massive amount of air traffic, the Air Commerce Act was passed and it allowed Federal regulations of air traffic rules to provide safety. There was not a lot of support to allow for research and development of aircrafts and air space. It was not until the World War II, where enough support was generated. Research provided a way for aircrafts to evolve into a more modernized industry. There were still many air collisions, due to the fact that there was a lack of an accurate system in place, which could monitor the air traffic precisely. This flaw allowed for the founding of the Federal Aviation System and this agency was charged to develop the air traffic control system, to minimize air collisions.

In the years to follow, the number of passengers, and the cost of fuel increased dramatically. The Deregulation of 1978 brought the growth of smaller air carriers and mergers of the larger carriers. This act also marked the beginning of the air industry as it presently stands today. The Airline Deregulation Act Of 1978

Over the past 30 years, the airline industry has navigated away from the controlling over regulation strategies to almost no regulation at all. In the 1980’s, the Airline Deregulation Act was signed into law. The goals of the act were: to keep safety a priority; maximize reliance on competition in air transportation; avoid industry concentration, unreasonable increased prices, reduce service and exclusion of competition; and to encourage entry of new air carriers. This act contributed to the removal of government control over fares, routes, and market entry. The FAA still had regulatory powers over all aspects of airline safety, but the Civil Aeronautics Board (CAB) powers of regulation were eventually phased out. The CAB regulated all domestic interstate air transport route as a public utility. It set the airline fares; routes travelled, and set schedules.

As a result of the act fare prices were lower, passenger loads has risen, and aircrafts can go on longer routes. Costs had also fallen and competition had increased dramatically. Various conflicts with labor unions for many carriers,...

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Assignment: #3 IndustryAnalysis
Term: Summer 2013
Course: Strategic Marketing
Global Airline Size
The 2013 global passenger airlineindustry is estimated to be a $539 billion industry with an additional $68 billion generated by these same firms through cargo transport9. The key measure of units for the industry is expressed as revenue passenger kilometer or RPK. This is defined as the actual kilometers flown by revenue paying passengers 10 and is estimated to be approximately 5.6 trillion for 20136. A final primary measure of the industry size is scheduled number of passengers. This is forecasted to be 3.1 billion9. These passengers are carried through more than 2000 airlines utilizing over 23,000 aircraft to complete more than 28 million flights to over 3700 locations 9.
Global Airline Performance and Growth
The industry will transform this $539 billion into $22.3 billion of operating profit (3.3%) and $10.6 billion in net profit (1.6%)9. An additional measure of efficiency performance is passenger load factor or PLF. This is the measure of % of available seats used (in kilometers). The 2012 global PLF was 79.1% which is a result of a continued steady improvement in efficiency for the past five years (2008 = 75.0%)2. The industry has grown steadily in RPK at a CAGR of...

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An Industry in which I have a potential future interest for an entrepreneurial venture is the ever changing airlineindustry. Although facing tough numbers after the 9/11 attacks, I have always held an interest for this industry. There are several basic economic characteristics for this industry. There are many opportunities, there are also many threats. The airlineindustry was heavily regulated by the Civil Aeronautics Board (CAB) for close to 40 years. Eventually, Congress abandoned airline price and service regulation and disbanded the CAB. Since deregulation the airlineindustry has becoming increasingly competitive. This industry is also very large and important to the travel and tourism industry. This industry is also very important in developing new business strategies amongst different industries.
Before working with any industry, you should take steps to analyze it. The two basic types of aviation are commercial aviation and general aviation. General aviation deals with operating you aircraft more for internal purposes. Commercial deals more with carrying passengers or cargo for hire. The scheduled airline...

...Hhhhhh Structure
Only looking at passenger travel, maintenance and cargo not included.
Back in the days: Full Service Carriers (FSC) controlling the market (sometimes close to oligopoly). Afterwards, low cost carriers (LCC) entered the market, as well as charter airlines (CC) (cheap cause crappy times)
Change is costs (hubs and smoke vs point-to-point without a home base), based on several routes
Concentration became lower, amount of competition became bigger and market share distribution over larger amount of companies. Concentration looking at intercontinental flights changed less, mainly international and domestic flights.
Momentarily 240 airlines covering 84% of total passenger travel. Top 10 companies (many of them are mergers) cover almost 50% of all passenger travel.
The former leaders are aiming to regain market power and increase the concentration, by creating alliances and some even mergering.
Alliances: sharing prices, sharing frequent flyer programs Skyteam
2nd: integrated units (processes aligned) KLM-Northwest
3rd: Merger of shares Air France - KLM
4th: full merger
 South west and Airtran (pending)
 United and Continental (approved)
 Delta and Northwest (Oct 09)
 USAir and America West
 PP t ti l f Additi l R ti M otential for Additional Reactionary Moves
 Recent International Consolidation
 Lufthansa and Austrian
 Air France and KLM
 Air France/KLM and Alitalia (25% ownership)
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In 2002 Delta airlines faced the unfortunate realization that the competition from low cost carriers like Southwest and JetBlue was becoming a serious problem. Even though Delta had been looking at this problem for a long period of time, the business model of Delta Airlines was organized by function and their solutions generally focused on individual aspects of the firm. For example, the marketing department provided marketing ideas, the customer service department offered customer related solutions etc. Delta realized that they did not have a comprehensive solution to dealing with the low cost carriers in the market. One of the simplest solutions proposed by Delta management was the idea that Delta could launch its own low cost subsidiary, however, looking at the rest of the airlineindustry, low cost subsidiaries seemed to be ideas that were either immediate failures or unsustainable over time. According to experts, they had “never seen a high-cost carrier transform itself into a low cost carrier”. With or without this option, Delta would have to find a solution to this problem.
The airlineindustry in the United States is immense, with more than 620 million passengers and over $81 billion in fares in 2001 alone. Unfortunately, while immense in size, in terms of profit, the airlineindustry continued to perform below the average for...

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This is not an exhaustive analysis. We created it for guidance during our marking, but everyone’s paper was different.
Executive Summary max 400 words; most important conclusions from the analysis. Make it persuasive.
• Lose marks for not having an Executive summary
1. Industry Position
Define the business/industry, what it does, how it does it
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Life cycle position – mature
Business cycle
• Revenue tied to the economy
• Fixed cost of the airplane is not tied to the economy
• The financing or leasing of the airplanes. Cost affected by interest rates.
2. External Factors
Technology
• It is bought, not developed
• Airplane/jet technology improves incrementally, not dramatically. Biggest issues are getting the right size planes, and fuel efficiency.
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